Organizational Strategy Research Paper

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The subject of strategy in organizations has become one of the dominant features of the contemporary world of academics and practitioners. The use of the word is pervasive. The genesis and development of the concept has been relatively swift yet has produced a rich variety of interpretations and uses. Its core meaning was taken by Chandler, to center on a logical sequence of goal-setting and resource allocation within firms. In his widely-adopted formula (Chandler 1962, p. 13): ‘Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.’ Subsequent work has emphasized the competitive element so that the purpose of a strategy is to maintain or improve performance. Strategies are judged by their ability to neutralize threats and exploit opportunities for the organization while capitalizing on strengths and avoiding weaknesses (Barney 1997, p. 27). Strategy also refers to the direction of an organization, which matches its resources to its environment in order to meet stakeholders expectations (Johnson and Scholes 1993, p. 10). Strategic management is concerned with the process by which strategies are adopted and put into practice.

1. Origins

The practical origin of the term strategy is found in military history. In the ancient world strategos was applied to the generalship of an army commander, ‘the art of the general.’ By 330 BC it also included notions of administration and the use of armed force in order not only to defeat enemies but also establish systems of governance (Quinn et al. 1988, p. 1). The word strategy was first used in English in the seventeenth century. By 1870, military dictionaries distinguished between strategy (planning conducted away from the enemy) and tactics (the immediate engagement of an adversary) (Whipp 1996, p. 13).

The idea of organizational strategy in a business or commercial sense was a product of the second half of the twentieth century. Yet its emergence as a separate subject of teaching and research in the 1960s owed much to its military roots. The pioneering book of Ansoff (1965) on Corporate Strategy, for example, distinguished between corporate strategy and business strategy, paralleling the military ideas of grand strategy and battle strategy. Corporate strategy was seen as selecting what business to be in; business strategy dealt with how to operate in a given business area. A second landmark text (Andrews 1971) also relied on these military distinctions. He emphasized the aim of strategy as establishing a clear dominance in a business domain while simultaneously planning for the movements of hostile adversaries (see also Quinn et al. 1988, p. 42).

The second main influence on the development of the subject of strategy was the discipline of economics. In the early decades of the twentieth century, research on industry form, competition and innovation had pointed to the role of individual firms in economic relations. Such writers were firmly set in the traditions of microeconomics. The approach was a rational one with a reliance on profit maximizing behavior by all economic agents, accessible information and the mobility of resources. Andrews’ view of strategy was therefore clear: ‘rivalry amongst peers for prizes in a defined and shared game’ (Pettigrew and Whipp 1991, p. 29).

The third force to shape the emergence of strategy as a subject was the geographical and corporate context. The flourishing of large, multi-product corporations, such as General Motors and Du Pont, took place in the 1920s and 1930s in the USA. As they grew commercially and organizationally more complex, so did their need for more sophisticated means of assessing markets and competitors and matching them with the resources of the firm. The early experts on strategy worked closely with these corporations in response to their needs. Ansoff was an executive at Lockheed Aerospace while Chandler was related to the Du Pont family. As the demand for technical experts to produce strategic analysis rose, so business schools and consulting firms grew in number and importance during the 1960s and 1970s. Outside of the US, corporate forms were much slower to evolve and in Europe the large-scale growth in business schools and the study of strategy did not occur until 20 years later.

2. Uneven Development

Given the late advent of strategy as a subject, its development since the 1960s has often been more colorful than more mature areas of the social sciences. New approaches have arisen, offering challenges to the main orthodoxies. Insights and techniques from outside of economics have been applied to enrich and extend the subject. As the study of strategy has progressed, so its full complexity has become apparent. The growth of the area is best understood by reference to three waves of activity: the classical era of the 1960s, the challenges set by organizational analysts in the 1970s and early 80s, and the production of a more composite approach to meet the circumstances of the 1980s and early 1990s.

During the 1960s, strategy experts placed a heavy reliance on planning techniques. Financial planning tools were created to link capital investments with production and to derive profit forecasts. Forecastbased planning was constructed in the light of unstable market behavior. Business portfolio matrices and product lifecycle tools were examples of devices produced to make forecasts (Bourgeois 1996, p. 5). Early computing technology raised the expectations of strategic planners regarding the potential of this planning-led approach. The conviction that the environment of the firm was eminently capable of being captured by such techniques was strong.

In the following decades, this planning-led approach to strategy continued as the mainstream, particularly in North America. Alternative voices appeared on both sides of the Atlantic with their attention directed not to planning strategy but the process of implementation. The process perspective was built upon decision-making theory (e.g., see Organizational Decision Making). First Lindblom (1959), and later March and Olsen (1976), demonstrated how the decisions of senior management were often less than rational, notwithstanding their use of planning apparatus. Trade-offs, compromises, and coalition formation were shown to be routine. These writers drew attention to the haphazard and highly subjective qualities of strategic decisions and their mode of implementation. Writers, such as Mintzberg (1978), revised the profile of the strategic decision making, and implementation activities in an organization, suggesting that these constituted important change processes in their own right and should be analyzed and managed accordingly. Concepts of power and culture were applied to the problem for the first time (e.g., Organizations: Authority and Power). The result was a more realistic appreciation of the problems strategic management involved, including the issues of political influences, aborted ideas and unintended outcomes.

Whilst this process-based approach has continued as a separate tradition in the study of strategy (often labelled strategic change), it also had a major influence on the third wave of activity in the 1980s. The driving force behind these new developments was a dramatic shift among international competitors. Japanese firms in the manufacturing and consumer goods sectors enjoyed spectacular gains in overseas markets, notably the USA and Western Europe. Their market success was based on the ability to combine product innovations with new standards in quality, underpinned by (in the eyes of western managers) novel forms of organization. These events provoked two responses from academics.

First, was a renewed interest in competitive analysis, drawing on the microeconomic perspective (outlined in Sect. 1). Porter played the leading role by highlighting ‘generic strategies’ (1980)—such as cost leadership vs. differentiation—and the need for organizations to clarify their choice of strategy. He went on to offer a model of extended competition (Porter 1985) which forced firms to treat seriously new sources of competition from outside a sector (e.g., see Competitive Strategies: Organizational). This fresh emphasis on competitor analysis was augmented by a rejuvenation during the 1980s of the resource-based theory of the firm. Here particular attention was paid to the identification and maintenance of the unique collection of capabilities (technological, organizational, financial, for example) found in successful firms but which others would find difficult to imitate. A preoccupation grew with ‘strategic intent’: the ability to create extremely long-term aspirations for an organization and link them to immediate operations (Hamel and Prahalad 1989). The insights of the strategic change analysts (e.g., see Organizational Change) became especially relevant to this new conception of strategy and competition (Pettigrew and Whipp 1991).

3. Current Themes

The emphasis in current strategy research, in part, arises from ideas and incomplete projects, which began in earlier eras; this is particularly true for the interest in strategic capabilities and transformation. In the empirical sphere the dominant characteristics of strategic studies has been their entry into hitherto unresearched settings. At the same time, it has been noticeable how other specialisms in the business studies area, such as human resource management have attempted to incorporate a strategic perspective (e.g., see Strategic Human Resources Management).

The harsh competitive conditions of the 1980s and 1990s, produced a general interest amongst business people in organizations, which could prosper in such circumstances. Companies such as Honda, Chrysler or ABB received intense scrutiny from practitioners and academics alike because of their superior strategic management. The result was that academics became exceptionally concerned with explaining their success. To this end, research has been targeted at the unusual ways in which such firms analyze their relationship with their environments, create ways of handling those relationships and do so in a consistent pattern of business behavior (Kay 1993, p. 9). The core of their success is attributed to their delivery of innovations in products or services. Research has shown that producing these innovations is explained by the existence of a set of supporting capabilities. In the case of Honda, its unique record of product innovation worldwide rests on a collection of distinctive cap- abilities involving: problem solving, project management and working with suppliers (Pascale 1990).

The circumstances, which prompted these exceptional feats of strategic management, have, in turn, become the subject of academic attention. The exploitation of information technology has transformed entire industries. New forms of communication have created totally novel means of acquiring information and purchasing goods or services. Information technology has also led to completely new types of products. The character of sectors, such as retail banking and insurance, has been transformed. The ability of organizations to manage the wholesale reworking of their strategic assumptions and operational methods has become a source of fascination to practitioners and academics alike. Whereas in the 1980s, the emphasis had been on the adjustment of company strategies to new rules of competition, today, the contemporary agenda is dominated by the prospect of companies facing the growth of new products, markets and sectors on a scale not seen since the twentieth century in Europe and the early twentieth century in the USA.

In parallel to these high profile projects on strategic capabilities and transformations, strategy scholars have moved away from their preoccupation with corporations. The result has been an engagement with strategic management within small businesses, voluntary and not-for-profit sectors and professional organizations. These alternative contexts have provided useful tests for established theories. Sometimes the characteristics of these under-researched sites have forced analysts and managers in the corporate sector to review their models. The ability of voluntary organizations (e.g., see Voluntary Organizations) to succeed with few resources and yet motivate staff is a case in point (Johnson and Scholes 1993, pp. 23–30).

4. Methods

The strategy field has witnessed the use of an extensive battery of research methods during its comparatively brief existence to-date. In the early phase, the quantitative methods associated with economics became well established. These techniques have continued to play a major role, especially in the measurement of performance and competition. From the 1970s, as the insights from psychology, politics and sociology were used to open up the strategic management process (see Sect. 2), so more qualitative approaches (including ethnography in the study of organizational culture, for example) were employed. The qualitative and quantitative currently co-exist productively (Kaplan and Norton 1996). More contentious is the common reference by strategy writers to individual company examples. Outsiders may confuse teaching cases (usually of a single organization) with full-scale research-based case studies. Nevertheless, popular accounts of corporate success stories and the personal reflections of leading executives which are light on formal research methodologies, have created an impression of superficiality which academics often have to live down.

5. Future Research

Given the youthful nature of the subject, the study of strategy in the future will continue to unravel the problems associated with understanding competitive environments, how they may be matched to the resources of an organization and how the resulting decisions can be implemented. Fresh opportunities for research will appear in the international sphere. This will include not only the continued relevance of global markets and organizations but also the further exploration of national contexts. The differences of the financial and business systems between the USA, Europe and Japan are well known, detailed comparisons with other parts of Asia or South America await. In addition, the fragmentation of social and economic relations—around, for example, network structures or self-organized commercial ventures—will pose a challenge to a subject which was founded on the problems of large corporations. Other tests will be supplied by links between strategy writers and specialists from other subject areas. Examples include, complexity theory and knowledge management experts from organization studies (e.g., see Learning: Organizational). There are also signs that those who are skeptical of the precepts of strategic management will increase their attention. Their assertions that strategy is merely

a specialized form of language which enhances the power in society of management is the opening salvo in what could be a long exchange of intellectual fire power. The response by the strategy experts will demonstrate how far the subject has come of age into its mature form.

Bibliography:

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